Consolidate Student Loans: Consolidation Vs. Refinancing

Federal and private student loan consolidation the two different types. Refinancing is a common term used to describe personal consolidation. These procedures are highly distinct. However, they are frequently misconstrued. This is how:

Federal student debt consolidation through the Department of Education merges several federal loans into a single federal loan. Some federal loan programs may require you to combine, but federal consolidation won’t cut your interest rate. Extending them can lower your payments.

Private student loan consolidation, also known as student loan refinancing, is a financial decision you make with the help of a private lender. If you are eligible, you may be able to acquire a lower interest rate and save money, but you will no longer be able to get government assistance.

Student Loan Consolidation Vs. Student Loan Refinancing

Student loan consolidation

Student loan refinancing

What does it do?

Combines multiple federal loans into one federal loan.

Combines private and/or federal loans into one personal loan.

Which loans can I combine?

Federal loans only.

Private and/or federal loans.

Can I lower my rates?



Can I save money?

No. Consolidation may lower your payments by extending the loan term, but your interest will increase.


Can I access federal loan protections, repayment options, and forgiveness programs?



Will I pay just one monthly bill?



Consolidating Private Student Loans

Replacing numerous student loans, whether federal, private, or a combination of the two, with a single, fresh personal loan is known as refinancing or consolidating private student loans. If the interest rate on your new loan is lower, you’ll save money.

Consolidate Student Loans: Consolidation Vs. Refinancing

Your new interest rate will be determined by your financial history, including your credit score, income, employment, and educational background. Rates typically range from 2% to more than 9%, and you usually need a credit score of at least in the high 600s to qualify.

Consider consolidating your private student loans if you:

  • Existing personal student loans.
  • Good or excellent credit is generally defined as a credit score of 690 or higher.
  • A stable job.
  • Access to a co-signer with those characteristics if that doesn’t sound like you.

Federal student loan consumer protections are lost when federal loans are refinanced into a private consolidation loan. These include the chance to tie payments to income and loan forgiveness options.

Private businesses provide the option to combine many student loans into one, much like the federal government does. Although personal loans cannot be transferred to the federal government, national and private loans can be consolidated with a private lender.

The objective of this method is to obtain a cheaper interest rate based on your financial history, in addition to the convenience of a single payment.

Use a consolidation calculator to compare monthly payments under three alternative scenarios: federal student debt consolidation, private student loan refinancing, and income-driven repayment programs.

Federal Consolidation of Student Loans

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Consolidating federal loans has no credit requirements and has the advantages of a single loan bill and possibly lower payments. However, it only applies to federal loans and won’t lower your interest rate. Take into federal account consolidation if you:

  • Need to consolidate to be eligible for income-driven repayment or public service loan forgiveness. This is the case if you have Federal Family Education, Perkins, or parent PLUS loans.
  • Have FFELP loans and want to qualify for student loan cancellation.
  • Want a single federal loan payment but don’t need it to be drastically lower?
  • Are in student loan default and want to get back on track.

Federal loans are paid off and replaced with a direct consolidation loan when you consolidate them with other loans from the government. Once you graduate, leave school, or enroll less than half-time, you are often eligible. Avoid organizations that charge fees to consolidate your federal debts for you; the Department of Education will do this for free.

When you consolidate federal loans, your new fixed interest rate will be the weighted average of your old rates, rounded to the nearest 1/8 of 1%. For example: Your new interest rate will be 6.25% if the standard is 6.15%.

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You will also receive a new loan term of 10 to 30 years. Your payback period will generally begin within 60 days of the first disbursement of your consolidation loan. It will be determined, among other things, by the total amount of your federal student loan debt.

How To Consolidate Federal Loans?

Click “Complete Consolidation Loan Application and Promissory Note” after logging into The application must be completed in one sitting, so gather the materials indicated under “What do I need?” before you begin, and allot about 30 minutes.

1. Indicate which loans you want to consolidate and which you do not.

2. Select a repayment strategy. You can choose a repayment schedule that is dependent on your income or determined by the sum of your loan. If you choose an income-driven plan, you must next complete a Request for Income-Driven Repayment Plan form.

3. Before submitting the form online, read the terms. Regular student loan payments should continue until your servicer verifies that consolidation is finished.

Consolidation is one of the few ways to get your loans back on track if they default. You must agree to participate in an income-driven repayment plan and make three consecutive total, on-time monthly payments on the defaulted loan to consolidate defaulted loans.


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